Data Collection Plan
A data collection plan is a detailed document. It describes the exact steps as well as the sequence that needs to be followed in gathering the data for the given Six Sigma project. This document is important because the people that design the data gathering plan are not the same people that will actually be […]
Inventory Migration Scope
Inventory Migration is a mammoth project exercise involving internal teams as well as many external agencies. Detailed planning, process, simulation, and training are the basis to ensure successful inventory migration exercise. Project Teams would consist of teams from all functional departments namely finance, legal /compliance, inventory planners, IT, procurement, marketing, order fulfillment and logistics & […]
Technical Foundations of ERP Architectures
Information technology is changing at a fast pace. Underlying ERP technology is needed to keep pace with first changing IT scenario and should also be flexible to adopt ever changing business scenario. ERP technical architecture basically defines layout of layers of application deployment between servers and desktops, interfaces and software objects. ERP architecture is no […]
The Economics of Nuclear Weapons
The recent India Pakistan skirmishes have brought the issue of a nuclear Armageddon to the forefront of international politics. The news channels in both countries, as well as the international media, have been discussing the possibility of the situation escalating into an all-out nuclear war. The question of the futility of such a war has […]
The Fall of a Giant: Wal-Mart
The fall of Wal-Mart Wal-Mart has been a global retailing behemoth. The rise of Wal-Mart is an amazing story, but it seems like the fall will be equally spectacular. Just a few decades, after Sam Walton from Bentonville Arkansas, started building the world’s largest retail empire. The same empire is today facing an existential crisis. […]
The confidence interval is a central concept of hypothesis testing. Although understanding its mathematical and statistical meaning is beyond the scope of this module, one needs to have a fair idea of the concept. Hence, a brief introduction of the confidence interval that is essential for the Six Sigma project team to understand is as follows:
The normal distribution is a continuous distribution. This means that the probability of reaching the exact point is zero. This conclusion has profound implication for estimation. This is because instead of reaching a point estimate, one needs to pen down an interval estimate to get a realistic answer. Thus we can’t say the probability of the value being exactly 100. However, we can make a fairly educated guess about whether the value will lie between 80 and 120.
A confidence interval attaches a probability to the above statement. For instance if we say that a value will lie between 80 and 120 with 90% confidence, we mean to say that there is a 9 out of 10 chance that this will be the case. However statistics operate on the law of large numbers and hence these values are expected to hold true only after a large number of experiments have been performed.
The confidence interval is therefore a result of using sampling. In the above case we can conclude that in a sample 90% of the total observations taken will have the value lying between 80 and 120.
The factors that influence the confidence interval have been listed down along with their precise relationship:
Hypothesis testing is almost always done on samples. Hence, we must understand that there can be a difference between the values drawn from the samples and the actual value of the population. This is what we call sampling error. This plays a vital role in interpretation of hypothesis testing. Hypothesis tests with a higher confidence level are more accurate than the ones with lower confidence levels.
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